The Hindu Business Line : National Company Law Tribunal — DCA may move apex court on HC order

THE Department of Company Affairs (DCA) is considering filing an appeal before the apex court against the recent Madras High Court order declaring the setting up of the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT) as unconstitutional.

The Companies (Amendment) Act, 2002, provided for setting up of the NCLT and NCLAT. According to informed sources, the Attorney General of India, Mr Soli Sorabjee, is being consulted on the issue.

Recently, the Madras High Court, while declaring that the formation of these tribunals was unconstitutional, had also raised certain queries on the provisions provided under various sections of Companies (Amendment) Act, 2002.

It had also ruled that the three-year term of office provided for members of NCLT was extremely short and it was a disincentive for competent people to join. Competent professionals could not be expected to give up their practices for a limited term of three years, the Bench had said. It had also identified certain other infirmities in the process of selection of members of the tribunals.

The Madras Bar Association had filed a writ petition challenging the formation of these tribunals. As per the Companies (Amendment) Act, the tribunal will take over the functions being hitherto performed by the Company Law Board (CLB), the Board for Industrial and Financial Reconstruction (BIFR) and the Appellate Authority of Industrial and Financial Reconstruction (AAIFR) as well as the high courts in the winding up of companies. The object of the Act was to facilitate expeditious revival/rehabilitation of sick industrial companies.

Some of the salient features of the Act include imposition of cess for rehabilitation and revival fund, obligatory for the financial institutions and banks to inform NCLT when they notice sickness, and timely disposal of cases.

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